Beware - Bitcoin's About To Turn Bearish Again!

Of late, there's been much speculation about the future of Bitcoin prices. After making spectacular highs of near 20K USD levels earlier this year, the cryptocurrency hasn't quite regained its previous momentum, and is trading at around $9000 levels these days. Proponents remain bullish as ever (I've seen recent predictions of $200K!) and critics continue to cry 'doomsday' for the beleaguered cryptocurrency that has lost close to 55% of its peak value since the start of the year.

I've personally been a Bitcoin bear since the start of this year and have cautioned investors against dabbling in it. I have three very clear viewpoints about Bitcoin. One, the underlying blockchain technology is definitely going to be a game changer and create much value across industries (FinTech included) in the years to come - but that doesn't necessarily warrant a price rise in Bitcoin itself. Two, Bitcoin is trapped in a paradox. How so? In order for it to be useful as a currency, its price will have to stabilise, just like any other fiat currency - but if that happens, speculative traders would run out of patience and begin dumping it, leading to a massive fall in price. And three - Bitcoin is not an asset, but a currency (or a medium of exchange) and its future value is dependent on one thing alone; that is, how many people are using it - or going to use it - to buy and sell stuff.

In the absence of a robust fundamental valuation too for Bitcoin, technical indicators can give us a clue about where BTC is headed. And make no mistake - Bitcoin made a very, very bearish move on the chart towards the end of January when it dipped below its 20-week moving average. Short-covering bounces aside, it hasn't recovered from its January fall, and will not either - unless something were to change dramatically and spectacularly (for the good, that is).


Technically speaking, we're now on the brink of the next wave of correction in BTC. The cryptocurrency has touched a strong point of resistance at around 9K levels and will likely continue the clear trend it has established (see the chart). We're probably going to see BTC breaching its previous low of 6,600 - 6,700 USB over the coming 4-6 weeks, and it's quite likely that this dip will see it correcting to near 5,500 levels. Retail investors are advised to avoid trading in Bitcoin and stick with more traditional asset classes at this point.